Trusts and Estates 101: From Those In The Know To Those Who Need To Know

Main menu

Post navigation

Planning for What? Part One: An Introduction to Estate Administration

Over the past few weeks, I’ve discussed the various reasons why estate planning should be a part of every adult’s broader life planning. I’ve also explained several common techniques used by estate planners and specific groups who have a greater need for estate planning. But, as important as planning is, it is equally important to understand how an estate is administered after the passing of a loved one.

An estate plan deals with two main administrative considerations: the probate process and the payment of transfer taxes. On Friday, I will discuss the various transfer taxes related to estates and trusts. Today, I will explain the basics of estate administration in New York.

The first step in administering an estate is filing a probate petition with a special court in New York known as the Surrogate’s Court. The petition will list key information about the deceased individual (also known as the Decedent) including their personal information, the names of the beneficiaries of the estate, the assets held by the Decedent at the time of his her death and an estimated value of the estate. The fee for filing the application will depend on how much the Decedent’s estate is worth at the time of his or her death.

Along with the petition, the Decedent’s last will and testament and death certificate are also submitted. For people dying without a will, there is a similar application called an administration petition. The process is slightly different than the probate process due to the lack of a will and additional documents that prove the person filing the petition has the right to the Decedent’s assets will also be required.

After the petition is filed with the Surrogate’s Court, a copy of the petition is sent to each person having a potential beneficial interest in the estate. To avoid this, the person filing the petition (the Executor of the estate) can have the beneficiaries sign waivers by which each beneficiary waives their right to be served the petition. Once all the waivers have been filed with the court or service is complete, the Surrogate’s Court will issue a decree and grant Letters Testamentary to the Executor of the estate.

Receiving the Letters Testamentary is only the first duty of the Executor. After he or she receives the Letters, the Executor will collect all the Decedent’s assets and retitle any personal assets in the name of the estate. If the Decedent’s assets are not readily known, the Executor may need to contact various banks, brokerage firms and insurance companies to determine if the Decedent had any accounts with them.

With the assets collected, the Executor’s next duty is to pay off any outstanding debts that Decedent may have had. This includes any income, gift, estate or generation skipping transfer taxes the Decedent’s estate may owe or the Decedent owed personally. For more complicated estates, the estate administration process may take several years and as the estate is administered, it may continue to receive income. In these situations, it will be necessary for the estate to file an income tax return for each year it remains open.

The final step is to pay out the remainder of the Decedent’s estate based on the terms of his or her Last Will and Testament. Depending on the nature of the estate, this may prove somewhat difficult, especially if the estate holds illiquid assets such as real estate and business interests. If the Decedent has not made specific reference to where certain property goes, the Executor may need to sell the property and distribute the proceeds to the estate beneficiaries.

Administering an estate with cooperative beneficiaries and no complications is a difficult process. Unfortunately, in some circumstances, complicated family and business relationships make the estate administration process even more complicated and can potentially lead to litigation amongst the beneficiaries or between a beneficiary and the Executor. Proper estate planning alone can reduce the risk of these problems, but it cannot entirely eliminate this risk.

The weeks, months and years after the death of a loved one can be incredibly difficult and having to go through the estate administration process without help is a burden most would like to avoid. By working with trusted advisors, the family can focus on their grieving and healing process while the attorneys, accountants and other advisors ensure that their loved one’s wishes are respected.